National Post (National Edition)
Eldorado puts Turkey, Brazil plans on hold
Company cites weak outlook for gold prices
Eldorado Gold Corp. will rein in spending and delay development plans in Turkey and Brazil to cope with what it expects to be a lacklustre year for gold.
The Vancouver-based miner lowered its expectations for the price of gold in 2017 to around US$1,150 an ounce, from a previous estimate closer to US$1,300 in an outlook released Friday. In order to offset that expected hit to revenue, the company slashed spending plans in Turkey and Brazil and altered a capital deployment timeline at its Skouries mine in Greece.
The precious metal put in a solid performance in the first half of 2016 but began to retreat after the November election of U.S. presidentelect Donald Trump, on expectations his spending plan will boost growth. Increased bearishness on gold set in after the U.S. Federal Reserve increased interest rates last month and hinted at several more for 2017.
The company now expects to spend US$425 million in 2017, down 27 per cent from its earlier top-end guidance of US$580 million. Shares in the company were down five per cent to $4.51 in Friday afternoon trading.
Eldorado will shelve plans to grow its Kisladag mine in Turkey. It will not spend any more on the expansion effort and reduce ongoing spending to US$45 million over the next five years, down from a previous target between US$50 million and US$60 million.
“In response to our current gold price outlook and our priority development projects in Greece, we have decided to reconfigure the mine plan at Kisladag” CEO Paul Wright said in a statement.
“The revised operating plan greatly enhances free cash flow from the operation in the near and mediumterm while maintaining long-term operating integrity.”
The company had planned to expand production at Kisladag to between 310,000 to 320,000 ounces of gold until 2020, but now projects upper limits of 245,000 this year and 285,000 in 2018 and 2019.
Eldorado also cut spending forecasts for its Tocantinzinho mine project in Brazil to US$35 million, just onethird of what it had previously said. It will also defer a decision on whether to develop the project further and will consider the gold price once all permits are in place. It had earlier said construction will begin this year.
The production forecast for all operations is now between 365,000 to 400,000 ounces, down from the 485,944 ounces of gold it produced last year. End-ofyear production in 2016 was below its third-quarter guidance of 495,000 ounces.
The miner, which also operates in Romania and Serbia, expects all-in sustaining costs to come in around $845 to $875 an ounce. Last year, the company brought its all-in sustaining costs down to to $915 per ounce, from an expectation between $940 and $980 per ounce.
Its mines in Greece, the company’s priority, remain largely on track with Olympias Phase II set for commissioning in the first quarter and construction at Skouries progressing toward an anticipated 2019 startup even as it deferred spending.
The moves are some of the last overseen by outgoing CEO Paul Wright before he retires after 20 years in the role this April.